the stronger euro is bad for eurozone
equities say strategists and here's the
proof Emmanuel macron wins the French
election clouds of political risk lift
and the euro Rises 7% on the trade
weighted basis eurozone equities head
south and in July eight consecutive
months of upgrades to European earnings
forecasts come to an end but there are
also reasons to think that this
adjustment will not last much longer
earnings after all are still set to rise
this year and some effects of a stronger
currency can be mitigated through
hedging a stronger euro will reduce
input costs especially dollar
denominated ones like energy and
commodities it will also make imports
cheaper that way helping keep inflation
down and moderate pay demands from
companies workers meanwhile the recovery
in the eurozone economy itself is
gathering pace and that's good for
European companies it's one reason the
currency is appreciating in any case the
currency index is still well below its
mid naughties peaks and look at this
chart which shows the inflation adjusted
trade-weighted exchange rate for the old
deutsche mark you can see that in the
mid-1970s and again in the mid-1990s
German exports has coped with the mark
at much higher levels than today's euro
equivalents finally over the long-term
Credit Suisse Research Institute's
points out that exchange rates make
little real difference to overall
returns so while there may be reasons to
worry about the durability of European
corporate earnings exchange rates are
not foremost among them